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Overseas Direct Investment (ODI)

Overseas Direct Investment (ODI) refers to investment made by an Indian entity in a foreign entity by way of equity capital, debt instruments, or other permitted financial commitments. The objective of ODI is to enable Indian companies to expand their global footprint, access international markets, acquire technology, secure raw materials, establish overseas subsidiaries or joint ventures, and achieve long-term strategic growth.

ODI transactions by Indian entities are governed by the Foreign Exchange Management Act, 1999 (FEMA), along with rules, regulations, and directions issued by the Reserve Bank of India (RBI), Ministry of Finance, and Ministry of Commerce & Industry. All ODI transactions must be routed through an Authorized Dealer Category-I (AD-I) bank and reported to RBI within the prescribed timelines.

Scope of Services – Checkpoints

Step 1: Eligibility & Net Worth Verification

  • Verify the eligibility of the Indian entity under prevailing ODI Rules and FEMA regulations.
  • Confirm that the proposed overseas investment is permitted under the automatic route or identify if any approvals are required.
  • Obtain a Net Worth Certificate from the statutory auditor/chartered accountant of the Indian entity.
  • Ensure that the total financial commitment (including equity, loans, guarantees, and other exposures) is within the permissible limit of 400% of the Indian entity's net worth, as applicable.

Step 2: Internal Approvals

  • Facilitate preparation of the Board Resolution approving the ODI proposal.
  • Ensure the resolution clearly specifies:
    • Purpose of the overseas investment
    • Amount and mode of investment
    • Structure of investment (Wholly Owned Subsidiary or Joint Venture)
    • Authorization to designated officials for execution and reporting
  • Validate that internal approvals are aligned with RBI and AD Bank requirements.

Step 3: Review of Foreign Entity Setup Details

  • Review and confirm the following details of the foreign entity:
    • Name and legal status of the foreign entity
    • Country of incorporation and regulatory environment
    • Nature of proposed business activity
  • If incorporation documents such as MOA/AOA or equivalent are not available:
    • Coordinate to obtain a CPA or equivalent professional certificate confirming proposed business activity and shareholding structure.
  • Review audited financial statements and valuation certificates for non-listed foreign entities in cases of acquisition, takeover, or additional capital infusion.

Step 4: Bank Submission & RBI Reporting through AD-I

  • Prepare ODI application documents in line with the checklist prescribed by the AD-I bank.
  • Coordinate execution and signing of documents by authorized signatories.
  • Submit complete ODI documentation to the AD-I bank.
  • Facilitate issuance of the Unique Identification Number (UIN) by RBI through the AD-I bank.

Step 5: Remittance of Funds

  • Post allotment of UIN, coordinate with the AD-I bank to ensure timely remittance of funds.
  • Ensure remittance is made strictly in accordance with approved ODI structure and RBI guidelines.
  • Obtain remittance confirmation and transaction references for compliance and audit purposes.

Deliverables

A. Coordination & Pre-checks of Indian Entity Documents

  • Latest audited financial statements
  • Net worth certificate issued by statutory auditor/CA
  • Independent audit report, if applicable
  • Board Resolution approving:
    • Incorporation or acquisition of foreign subsidiary/JV
    • Amount and mode of investment
  • KYC documents of Indian entity including:
    • PAN
    • MOA & AOA / LLP Deed
    • Certificate of Incorporation
    • Bank account details
  • Additional CA certificates or declarations as required by the AD Bank

B. Coordination & Pre-checks of Foreign Entity Documents

  • Formation/incorporation documents
  • Bylaws or equivalent constitutional documents
  • Initial resolutions and authorization documents
  • Foreign entity bank account details
  • Proposed business activity and operational plan
  • Proposed shareholding pattern
  • CPA or equivalent certificate (where incorporation documents are not available)
  • Audited financials and valuation certificate for non-listed entities in case of acquisition or additional infusion

C. Compliance Review of ODI Transaction Details

  • Amount of proposed investment
  • Mode of investment (Equity / Loan / Guarantee / Other financial commitment)
  • Country of investment
  • Nature of entity (Wholly Owned Subsidiary or Joint Venture)
  • LSF / Non-LSF classification checks as per RBI and AD Bank norms

D. Documentation & Regulatory Compliance

  • Preparation and submission of ODI documentation to the AD Bank
  • Facilitation of UIN generation and RBI reporting through AD Bank
  • Coordination for Limited Scrutiny Framework (LSF), if applicable, subject to AD Bank requirements

E. Remittance Confirmation

  • Ensure receipt of MT103 / equivalent remittance confirmation as proof of ODI transaction

Timeline

  • Approximately 15 working days from receipt of complete documents from both Indian and foreign entities, subject to:
    • Timely availability and accuracy of documents
    • Complexity of the transaction
    • AD Bank processing timelines
  • Client to provide written confirmation from registered email ID authorizing Silkroutech to facilitate coordination and documentation. All final approvals remain the responsibility of the company.

Exclusions

  • Sectoral or specific approvals from RBI or other regulators
  • Foreign exchange rate negotiation
  • ODI trade charge negotiation with banks
  • Annual filings such as FLA, APR, issuance of share certificates
  • Post-investment ongoing compliance requirements
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